On Friday, the EXIM Bank’s Chairman’s Council on China Competition—a strategic subcommittee at EXIM, the official export credit agency of the United States—held its first official meeting to discuss EXIM’s role in countering what it calls aggressive export credit financing from the People’s Republic of China (PRC).
The Council on China Competition, established earlier this fall by EXIM Advisory Committee Chair and former Congressman Stevan Pearce, is to provide insight to EXIM on how China is engaging in strategic competition against the United States, and how PRC actions impact American interests and economic security.
The committee is chaired by Ambassador Paula Dobriansky, current U.S. Under Secretary of Defense for Policy and Vice Chair of the Atlantic Council’s Scowcroft Center for Strategy and Security, and former Under Secretary of State for Global Affairs.
At Friday’s meeting, both Ambassador Dobriansky and EXIM Chair Kimberly Reed highlighted the urgency of EXIM’s new Program on China and Transformational Exports. The Transformational Exports program, which was signed into law in December 2019, directs the export-import bank to provide sufficient financing to directly neutralize export subsidies offered by the PRC in key strategic areas.
Specifically, the program is designed to advance the comparative leadership of the United States and support innovation in ten transformational export industries, including artificial intelligence, 5G, quantum computing, biomedical sciences, biotechnology and renewable energy.
Under its legal mandate, EXIM must reserve at least 20 percent (or $27 billion) of its total $135 billion financing authority for support made under the Transformational Exports program.
“EXIM’s Program on China and Transformational Exports is one of the most important programs in the agency’s history,” said Ambassador Dobriansky. “The Program will play a critical role [in] countering Chinese aggressive export credit subsidies and advancing American leadership and jobs in vital export sectors such as 5G. This subcommittee’s timely and relevant work will advise EXIM’s Advisory Committee on how EXIM can make the most of the indispensable role of supporting U.S. companies in the face of fierce competition from state-backed Chinese entities.”
Belt and Road
Over the weekend, Chairman Reed wrote an op-ed for a U.S. financial news television network in which she emphasized that from 2015 to 2019, subsidized export financing from the Chinese government totaled 90 percent of that provided by all G7 countries combined, while in 2019, it provided three times the export financing of the next-largest provider—at least $76 billion, by official count.
Per Chairman Reed, this funding, typically funneled through the China Development Bank, the Export-Import Bank of China, and China’s state-owned provider of export credit insurance, Sinosure, has been instrumental in boosting China’s influence abroad, and in promoting its One Belt, One Road global infrastructure initiative.
In terms of U.S. response to this development, Chairman Reed pointed to EXIM’s two recent finance authorizations totaling $400 million to support U.S. exporters to Pemex, Mexico’s national oil and gas company.
“We know China is interested in expanding its influence in North America because, during EXIM’s years of limited activity [ed: the four-year period when EXIM was unable to fund large-scale projects due to a lack of Congressional mandate], China pursued closer ties with Pemex and subsequently closed its first transaction with the company and has another in the pipeline, notwithstanding its 76-year association with EXIM,” Reed wrote.
Reed also pointed to a $4.7 billion EXIM financing award in May of this year to support U.S. companies participating in the engineering and construction of an integrated liquefied natural gas (LNG) project in Mozambique.
”It reflects how companies and governments planning major construction want to veer away from proposed deals with Beijing and Moscow,” Reed added. “In this case, as soon as they knew EXIM was reopening, Chinese and Russian entities were dropped as senior lenders. This was one of the largest transactions in EXIM’s history. It will support 16,700 American jobs across 68 suppliers in eight states.
Earlier this year, the bank approved $91.5 million in loan guarantee financing for U.S. engineering and construction services —specifically through an Illinois-based firm called Weldy-Lamont—to Senegal, which was the first African country to sign up for China’s One Belt, One Road initiative. Some 78 percent of Senegal’s bilateral debt is to China, a strategy that EXIM and other critics have said amounts to “debt-trap diplomacy” by keeping developing economies in thrall to Chinese government creditors under onerous debt terms.